Two For One Special – December ’15 and January ’16 Monthly Financial Reports

Welcome to Retire29’s LAST monthly financial report! I enjoy doing these little updates, but I believe that everyone has found the bathroom at this point. From here on out, I will be moving to quarterly updates on my progress toward financial independence.

I have a few reasons for lowering the frequency. The most significant reason is that my efforts for content are best spent providing advice, inspiration, and leadership. I plan to retire sometime in 2020, a little over four years away. Publishing 50+ progress updates between now and then seems excessive. Most readers know that the plan is reasonable: cut down on expenses, invest the difference. I can retire when my side hustle income + my dividend income > my expenses. Talking about the intricacies therein is important, but breaking out the numbers every 30 days doesn’t add much value.

December and January were pretty amazing financially speaking (all details are below). I made several improvements to Retire29 in January, and set a monthly record for traffic (16k views). I also bought a few Fiverr* gigs (for $5 each!) that I used to create a new template for MailChimp (looks more professional and drives traffic back to blog) as well as paid an Adsense guy who optimized my ads. This has paid off in spades. My Page RPM is now above $2, and January was my best ever month for Adsense—about $32. I know $32 is a rounding error to a lot of people’s blogs. But hey, I’m excited for how that can grow by retirement in 2020.

*Affiliate Link: I really like Fiverr. It’s super easy to use, cheap, and it gets the job done on little online tasks that you might not want to waste your time on. This link gets you a free gig to start.

Elsewhere financially, with January came a raise, a tax return (now included in net worth as a receivable) and my annual bonus. I also won my fantasy football league ($750 baby!). This lessened the blow from the worst January in the stock market since 2009. The S&P is down 5.8% since my last net worth update on December 3rd, but my own net worth since then is actually up 0.5%.

We had a low-key Christmas. I got a really awesome Nikon camera from Wife29, which I used for all the pictures you see on this post (and will use for all future pictures at Retire29). I’m still learning the ins-and-outs (the iPhone camera has made me lazy), but the photo quality makes it worth it.

We finally found a church in December. We’re not maniacs or anything when it comes to church, but we both grew up in church-goin families. In the Army, I kept going a little bit (I even got baptized in Saddam Hussein’s swimming pool), but have sort of lost touch in the last few years. We believe in Heaven, Hell, and the power of prayer, and we wanted to make sure our offspring had some of those ideals, as well. We test drove a half-dozen churches over the last 7 years, with meh results. We finally found one with tons of racial integration, great music, large enough where we don’t feel noticed, a single collection per service, in our age bracket, and thoughtfully entertaining in its sermons. When we walked in the first time, it was obvious that we’d be staying—just a visceral reaction. If you happen to live in the NoVA area and you are also looking for a decent church to be a part of, contact me.

There is pile of great drafts and ideas setting up a fun and informative spring here at Retire29. But, before I get too far ahead, let’s get to the numbers!

The Path to Retirement

My passive income plus side hustling covered 19.7% of my expenses in January, and 15.9% in December. The trend is moving up! This is largely due to expenses dropping, but also because side hustles are taking hold, and passive income is stabilizing after the dividend rout in oil stocks.

Passive Income

Dividends

More dividend cuts. The biggest one was Kinder Morgan. The KMI cut in December shook the dividend growth investing world. Richard Kinder had telegraphed, vehemently so, 10% dividend increases annually over the next five years. Management continued this rhetoric until as late as last fall. The belief was that KMI would be immune to oil price volatility, given that they acted as a tollbooth operator (they are a pipeline company), and benefit from take-or-pay contracts that generate revenue based on volume.

Well, this all fell apart on December 8th, when KMI cut its dividend by 75%. In one fell swoop, my dividend income dropped by $30/month. Ouch. Basically, KMI lost confidence in the macro environment, and needed to start being a bit more defensive. On the plus side, KMI is no longer staring at mountains of debt (S&P graciously took them off negative credit watch) or potential equity dilution in order to reinvest in their business. This bodes well for future dividend increases, but man, this was a tough pill to swallow. Elsewhere, the bloodletting in commodities pinched Potash, who cut their dividend by a third.

It wasn’t all doom, though. Mastercard, Pfizer, CVS, AT&T, ConEd, Canadian National, HCP, and Cincinnati Financial all raised their dividends since my last update. Couple that with some share purchases in Apple (talk about a bargain) and more investment in my 401k (S&P 500 ETF), and you get passive income that has sort of held steady.

My first year as a dividend growth investor has been a mixed bag. On the plus side, I’m getting $770/month in dividends simply for maintaining a pulse. On the downside, I thought it would be more than $770 by now. I can only thank/blame myself for this, as I picked all of these companies. But man, oh man, did I pick a bad time to start investing in blue chip commodity stocks. 2015 was a BRUTAL year for commodities, with the S&P Energy Sector down 21.1% for the year. That’s just awful, and energy dividends went that direction as well. If oil prices ever move up, or stabilize, then we should get to a point of growing dividends (rather than the cuts and suspensions of the past few months). That will be a nice change.

As they say, the best cure for low oil prices is low oil prices. Active oil rig counts continue to fall, and are at their lowest level since August ’99. Oil companies are laying off workers, suspending investment, and curtailing production. Tankers and storage sites are filling up offshore and down in Cushing. Bottom line, $27 oil (are you freaking kidding…unbelievable) can’t stay here forever (we’re already back at $33, a week after that bottom). Equilibrium price will move higher as the upstream factors mentioned above move into the supply equation. But dang, ain’t this somethin’ else. I certainly never expected oil to get this low and stay low for so long. Shows what I know…

Interest

Side Hustles

My buddy J$ at Rockstar Finance was kind enough to pick up two of my posts in January for mass release. That certainly stoked the flames of traffic in January. December was another story. I went AWOL for about three weeks, not feeling like publishing anything.

On the income front, I’m happy with the direction of things. You’ll see three Fiverr gigs in the expenses line, but I got $120 in revenue for the past two months. That’s with writing just eight posts and nothing on Seeking Alpha. If you figure around four hours per post, then I’m making like $4/hr on blogging—not bad!

Going forward, things should be even better. As I said at the top, my MailChimp template (which is how I send subscribers these posts), now has a lengthy, professional preview and a link back to the site if you want to read the whole thing. I like this a lot, because embedded media doesn’t show up very well (or at all) on e-mail. Also, Adsense is optimized now, which has led to a nice bump in Adsense earnings. I also started getting some affiliate money from Raise and Cardpool—two gift card resellers that I strongly recommend to anyone looking to save some incredibly easy money.

Expenses

Finally, a good showing on expenses.

The Bottom Four Rows: I went to the ATM in November and got $60, and I still have $44 in my wallet. That’s kinda neat. We also haven’t had any travel expenses recently. I bought a Fiverr gig for a non-Retire29 related project. Our Phones at RingPlus are now even cheaper than when I last posted about them, which is unbelievable, but true. We have what’s called “Your Plan 2” which gives us 1500 Minutes, 1500 Texts, and 1.5G data per month for just $5. Yes, five dollars, for all that good stuff—all on the Sprint network.

The Bad: Entertainment was a bit high, as were gifts, but this has a lot to do with the holidays (yes, we still do gifts) and fantasy football. My entry fees are here, even though my winnings are not. Groceries were very high in January. We’re making a concerted effort to dine out less (just $120 in January, the lowest ever). This required a lot of “pantry investment” in fancy stuff like sesame oil and various flours. Not exactly “one-time charges” but I think we’ll see the grocery number come down slightly while the dining number should remain steady at about $100/month.

The Good: Lots of good stuff here. We previously overpaid on Medical and our HOA fee, which is why you see those drops in Housing and Medical. Otherwise, pretty standard stuff. Our expenses in January 2015 were almost $8100. So, this is a huge year-over-year (like 47%) improvement.

Work To Do: We still need to kill that second car payment.

A few general notes on tracking expenses. I pay for most things in the Retire29 household. My wife has her own account which she uses for some things that I don’t want to be involved in (see: Hair Care). Because of this, we have an agreement that she gets an “allowance” (for lack of a better word) from me. When I make this transfer, I expense it to the the appropriate line, even if she doesn’t spend it right away (or ever). This is the same way I treat cash withdrawals; cash is “spent” the moment I withdraw it.

Additionally, I make a thoughtful effort to account for every expense I make. However, I don’t account for several expenses. These are:

Work-Reimbursed Expenses: Things like tuition, training, and mass transit are reimbursed by my employer and are directly related to my work. If I wasn’t working, I wouldn’t have these expenses, so I leave them out.

Revenue-Producing Expenses: Expenses related to, say, shipping charges for selling stuff online are not included. I leave these out because I’m making money on the exchange, and I’m not including the profit.

Bottom line, the spirit of tracking expenses is to identify what you need to have in income in retirement. The small manipulations I make are in the spirit of creating an accurate picture for what my lifestyle expenses would be in retirement.

Oh, and just for the record (in case you’re new here), housing is expected to fall significantly in retirement. We build up about $1.4k in equity per month in our current home. In mid-2020 (retirement), I expect to have enough equity in our current NoVA home (~$200k equity) to be able to buy a similar house nearly outright (if there’s a small mortgage, that might be okay) in a far cheaper location. This plan to relocate is essential to our early retirement scheme.

Net Worth

Net worth rose 0.52% to $352,257 since my last update Dec. 3rd. The S&P was down 5.8% over this period, so I outperformed significantly. This isn’t due to some great investment performance or anything. Rather, I got my annual bonus, I’m accounting for my tax return as a receivable (since I know what it is now), I won $750 in fantasy football, my covered calls all paid off handsomely, and I had the usual debt paydowns.

A few general notes on net worth. First, net worth really doesn’t matter much at all. I’m much more concerned with the income generated from my investments rather than the value of those investments.

Second, everyone calculates net worth a little differently. I treat my life as a business. Meaning, I look at assets less liabilities. Liabilities are easy: any money I owe to somebody else. Assets are much more contentious. In business parlance, an asset is anything for which you will derive future economic benefit. In this way, you could include almost any good you own that has a fair market value or intangible asset (like the present value of my own future wages). However, that would sort of lose the spirit of net worth. For my net worth number, I include real assets like cars and homes, since I will be selling them at some point in the future and because I can borrow against their value (an economic benefit). For this same reason, I don’t include the value of things like my new Nikon camera, the basketball shorts I’m wearing, or extra rolls of toilet paper. I exclude these items because I’ll probably never sell them, I can’t borrow against them, the value is difficult to determine, or because the value is immaterial.

Just like with tracking expenses, what you include/exclude from your net worth number should be a fair and accurate reflection of your financial position. Most people don’t include “receivables” in their net worth, but I do. Currently on my credit cards are costs associated with things like tuition or work training that my work will reimburse me for within 30 days. I include the cost of these items in my consumer debt, so why wouldn’t I include the accounts receivable? Answer: I should. The same goes for earned but unpaid wages (which is usually zero, since I’m paid at end of the month and I record this as of the end of the month). The same goes for accrued vacation if your work offers a cash-out option (which mine does). I also include (in my investments) dividends that have gone ex-date but are not yet paid. These are dividends to which I have legal title, but haven’t been paid. I am owed this money, so I include it. I might one day exclude this number if it becomes immaterial. However, right now this amount of “owed dividends” runs constantly around $600, which is still a lot of money in my eyes.

That’s all for this report. Next one will come out in April, covering all of Q1 2016. Thanks for reading!

7 Comments

Looks like a great last couple months for you Eric. Are your dividends in taxable accounts only or does that also include tax deferred accounts? Your passive income chart looks great. In about 1.5 years you’ve bumped up your non-work income to cover 20% of your expenses which is awesome. Another couple years and you’ll be in absolutely wonderful shape. Keep up the good work!JC @ Passive-Income-Pursuit recently posted…Weekly Roundup – January 30, 2016

JC, The passive income is across all accounts, taxable and tax-deferred. Since the money is all fungible, and will be accessible early in life, I’m not too concerned with the breakout. My rule of thumb is to have 1/5 of my retirement assets in easy access (taxable) accounts. The rest can be in tax-deferred accounts and taken out over time using clever tax strategies.

I keep to net worth calculations. My liquid net worth is the amount of money I have invested in the market and it includes things like houses and cars. My total net worth includes all assets and Liabilities.

After that crazy January in the market I am surprised you actually came out positive for January. It was brutal for sure!

That is really awesome you stepped up your blog game, I can tell a difference and congrats on the record breaking month. I actually broke my income record as well for January. Really excited about it!

And of course, what I am most congralutaroy about for you is winning your fantasy football league!. ha! I am obsessed with fantasy football and am happy you won that much money. That is a great pay out! I didnt win crap this season! 😐Alexander @ Cash Flow Diaries recently posted…January 2016 Net Worth Update

Hey Alexander, Yah, FF was crazy! I needed a monster week 16 to pull out the victory, and my team had been ravaged by injuries. I somehow came up with 143 points from this ragtag bunch of guys like Hit Man Hurns and Kirk Cousins. Couldn’t believe it.

If you don’t feel net worth matters much, why do you complicate the calculation by including receivables such as dividends due, accrued vacation, etc..? Also, isn’t net worth meaningful in the sense that anyone could liquidate their net worth and re-invest for whatever yield is available at the time?Dan recently posted…Why I’ve Decided Not to Set Any Specific Retirement Goal

It would appear that an awesome last couple months for you Eric. Are your profits in assessable records just or does that additionally incorporate expense conceded accounts? Your easy revenue graph looks incredible. In around 1.5 years you’ve knock up your non-work wage to cover 20% of your costs which is great. Another couple years and you’ll be fit as a fiddle. Keep doing awesome!